10-Q 1 app-20220331.htm 10-Q app-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission File Number: 001-40325
AppLovin Corporation
(Exact name of registrant as specified in its charter)
Delaware45-3264542
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1100 Page Mill Road
Palo AltoCalifornia 94304
(Address of registrant’s principal executive offices, including zip code)
(800839-9646
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Class A common stock, par value $0.00003 per shareAPPThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a  non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in  Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of May 3, 2022, the number of shares of the registrant’s Class A common stock outstanding was 299,383,309 and the number of shares of the registrant’s Class B common stock outstanding was 78,662,622.



Table of Contents
Page
 



NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include statements about:
our future financial performance, including our expectations regarding our revenue, cost of revenue, and operating expenses, and our ability to achieve or maintain future profitability;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
the demand for our AppLovin Software Platform and AppLovin Apps;
our ability to attract and retain business clients and users;
our ability to develop new products, features, and enhancements for our AppLovin Core Technologies and AppLovin Software Platform and to launch or acquire new AppLovin Apps and successfully monetize them;
our ability to compete with existing and new competitors in existing and new markets and offerings;
our ability to successfully acquire and integrate companies and assets and to expand and diversify our operations through strategic acquisitions and partnerships;
our strategic review of our AppLovin Apps portfolio;
our ability to maintain the security and availability of our AppLovin Core Technologies, AppLovin Software Platform, and AppLovin Apps;
our expectations regarding the effects of existing and developing laws and regulations, including with respect to taxation and privacy and data protection;
our ability to manage risk associated with our business;
our expectations regarding new and evolving markets;
our ability to develop and protect our brand;
our expectations and management of future growth;
our expectations concerning relationships with third parties;
our ability to attract and retain employees and key personnel;
our expectations regarding our share repurchase program;
our ability to maintain, protect and enhance our intellectual property; and
the increased expenses associated with being a public company.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking
1

statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, partnerships, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
2

PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
AppLovin Corporation
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)
(unaudited)
March 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$1,413,256 $1,520,504 
Restricted cash equivalents 1,050,000 
Accounts receivable, net684,461 514,520 
Prepaid expenses and other current assets200,384 150,040 
Total current assets2,298,101 3,235,064 
Property and equipment, net63,716 63,608 
Operating lease right-of-use assets66,185 70,975 
Goodwill1,584,928 966,427 
Intangible assets, net2,018,098 1,709,347 
Other assets136,165 118,158 
Total assets$6,167,193 $6,163,579 
Liabilities, redeemable noncontrolling interest, and stockholders’ equity
Current liabilities:
Accounts payable$369,659 $258,220 
Accrued liabilities160,421 133,770 
Licensed asset obligation7,735 17,374 
Short-term debt29,560 25,810 
Deferred revenue76,115 78,930 
Operating lease liabilities15,936 18,392 
Deferred acquisition costs, current125,691 107,601 
Total current liabilities785,117 640,097 
Long-term debt3,195,919 3,201,834 
Operating lease liabilities, non-current59,871 62,498 
Licensed asset obligation, non-current 8,039 
Other non-current liabilities113,831 112,820 
Total liabilities4,154,738 4,025,288 
Commitments and contingencies (Note 5)
Redeemable noncontrolling interest160 201 
Stockholders’ equity:
Convertible preferred stock,100,000,000 shares authorized, no shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
  
Class A and Class B Common Stock, $0.00003 par value—1,700,000,000 (Class A 1,500,000,000 and Class B 200,000,000) shares authorized, 375,286,039 (Class A 296,623,417 and Class B 78,662,622) and 375,089,360 (Class A 296,426,738 and Class B 78,662,622) shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
11 11 
Additional paid-in capital3,163,481 3,160,487 
Accumulated other comprehensive loss(58,986)(45,454)
Accumulated deficit(1,092,211)(976,954)
Total stockholders’ equity2,012,295 2,138,090 
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity$6,167,193 $6,163,579 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

AppLovin Corporation
Condensed Consolidated Statements of Operations
(in thousands, except for per share data)
(unaudited)
Three Months Ended
March 31,
20222021
Revenue$625,421 $603,877 
Costs and expenses:
Cost of revenue281,780 223,061 
Sales and marketing290,133 265,513 
Research and development126,250 60,876 
General and administrative55,245 42,962 
Total costs and expenses753,408 592,412 
Income (loss) from operations(127,987)11,465 
Other income (expense):
Interest expense and loss on settlement of debt(32,009)(35,010)
Other income, net2,014 9,790 
Total other expense(29,995)(25,220)
Loss before income taxes(157,982)(13,755)
Benefit from income taxes(42,684)(3,180)
Net loss(115,298)(10,575)
Add: Net loss attributable to noncontrolling interest41 54 
Net loss attributable to AppLovin(115,257)(10,521)
Net loss per share attributable to common stockholders, basic and diluted$(0.31)$(0.05)
Weighted average common shares used to compute net loss per share attributable to common stockholders, basic and diluted371,967,881 222,408,568 
The accompanying notes are an integral part of these condensed consolidated financial statements. 

4

AppLovin Corporation
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended
March 31,
20222021
Net loss$(115,298)$(10,575)
Other comprehensive loss:
Foreign currency translation loss, net of tax(13,532)(721)
Total other comprehensive loss(13,532)(721)
Add: Net loss attributable to noncontrolling interest41 54 
Total comprehensive loss attributable to AppLovin$(128,789)$(11,242)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

AppLovin Corporation
Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity (Deficit)
(in thousands, except share data)
(unaudited)
Redeemable
Noncontrolling
Interest
Convertible
Preferred Stock
Class A and Class B Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance as of December 31, 2021$201  $ 375,089,360 $11 $3,160,487 $(45,454)$(976,954)$2,138,090 
Stock issued in connection with equity awards— — — 1,179,554 — 6,541 — — 6,541 
Shares withheld related to net share settlement— — — (89,319)— (4,227)— — (4,227)
Repurchases of stock - repurchase program— — — (893,556)— (43,697)— — (43,697)
Stock-based compensation— — — — — 44,377 — — 44,377 
Other comprehensive loss, net— — — — — — (13,532)— (13,532)
Net loss(41)— — — — — — (115,257)(115,257)
Balance as of March 31, 2022$160  $ 375,286,039 $11 $3,163,481 $(58,986)$(1,092,211)$2,012,295 
The accompanying notes are an integral part of these condensed consolidated financial statements
6

AppLovin Corporation
Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity (Deficit)
(in thousands, except share data)
(unaudited)
Redeemable
Noncontrolling
Interest
Convertible
Preferred Stock
Class A, Class B and Class F Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
(Loss)
Accumulated
Deficit
Total
Stockholders’
Deficit
SharesAmountSharesAmount
Balance as of December 31, 2020$309 109,090,908 $399,589 226,364,401 $7 $453,655 $604 $(1,012,400)$(158,545)
Stock issued in connection with equity awards— — — 1,232,156 — 10,143 — — 10,143 
Repurchases of stock— — — (214,509)— — — — — 
Stock-based compensation— — — — — 29,667 — — 29,667 
Other comprehensive loss, net— — — — — — (721)— (721)
Net loss(54)— — — — — — (10,521)(10,521)
Balance as of March 31, 2021$255 109,090,908 $399,589 227,382,048 $7 $493,465 $(117)$(1,022,921)$(129,977)
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

AppLovin Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
March 31,
20222021
Operating Activities
Net loss$(115,298)$(10,575)
Adjustments to reconcile net loss to operating activities:
Amortization, depreciation and write-offs128,989 88,817 
Amortization of debt issuance costs and discount3,246 4,303 
Stock-based compensation44,640 29,959 
Change in operating right-of-use asset5,751 5,796 
Loss on settlement of debt 16,852 
Net unrealized gains (losses) on fair value remeasurements957 (11,214)
Net gain on foreign currency remeasurement(457)(1,305)
Changes in operating assets and liabilities:
Accounts receivable(170,250)(43,917)
Prepaid expenses and other current assets(54,461)(18,775)
Other assets1,098 472 
Accounts payable111,604 9,370 
Operating lease liabilities(6,046)(5,631)
Accrued and other liabilities21,138 (1,339)
Deferred revenue(2,630)(994)
Net cash provided by (used in) operating activities(31,719)61,819 
Investing Activities
Purchase of property and equipment(285)(121)
Acquisitions, net of cash acquired(1,045,816)(4,152)
Purchase of non-marketable investments and other(14,146)(14,000)
Proceeds from other investing activities2,162  
Capitalized software development costs(1,658) 
Net cash used in investing activities(1,059,743)(18,273)
Financing Activities
Proceeds from debt issuance, net of issuance costs 844,729 
Payments of debt principal(4,577)(302,327)
Payments of finance leases(6,176)(840)
Proceeds from exercise of stock options8,110 12,882 
Payments of deferred acquisition costs(1,710)(152,245)
Payments of licensed asset obligation(17,374) 
Repurchases of stock - repurchase program(43,697) 
Payments of deferred IPO costs (1,825)
Net cash provided by (used in) financing activities(65,424)400,374 
Effect of foreign exchange rate on cash and cash equivalents(362)(80)
Net increase (decrease) in cash and cash equivalents(1,157,248)443,840 
Cash and cash equivalents at beginning of the period2,570,504 317,235 
Cash and cash equivalents at end of the period$1,413,256 $761,075 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

AppLovin Corporation
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
Three Months Ended
March 31,
20222021
Supplemental non-cash investing and financing activities disclosures:
Acquisitions not yet paid$28,995 $32,161 
Assets acquired under finance leases$8,703 $445 
Deferred IPO costs not yet paid$ $1,834 
Supplemental disclosure of cash flow information:
Cash paid for interest on debt$28,865 $15,662 
Cash paid for income taxes$4,411 $221 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9

AppLovin Corporation
Notes to the Condensed Consolidated Financial Statements
(unaudited)
1. Description of Business Basis of Presentation
Description of Business
AppLovin Corporation (the “Company” or “AppLovin” or "we") was incorporated in the state of Delaware on July 18, 2011. The Company is a leader in the mobile app industry with a focus on building a software-based platform for mobile app developers to improve the marketing and monetization of their apps. The Company also has a globally diversified portfolio of apps—free-to-play mobile games that it operates through its own or partner studios.
The Company is headquartered in Palo Alto, California, and has several operating locations in the U.S. as well as various international office locations in North America, South America, Asia and Europe.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, the unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2022. The condensed consolidated balance sheet data as of December 31, 2021 was derived from the audited consolidated financial statements at that date but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of the Company’s financial position, results of operations, cash flows and stockholders’ equity for the interim periods presented. The results of operations for the three months ended March 31, 2022 shown in this report are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 or any other period.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with GAAP. Consolidated financial statements include accounts and operations of the Company and its subsidiaries in which the Company has a controlling financial interest. In accordance with the provisions of Accounting Standards Codifications ("ASC") 810, the Company consolidates any variable interest entities ("VIE") where it is the primary beneficiary. The Company engages in business relationships with certain entities in the ordinary course of business to develop game Apps. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interest when we are not considered the primary beneficiary. The Company evaluates its relationships with all VIEs on an ongoing basis. All intercompany transactions and balances have been eliminated upon consolidation.
Revenue from Contracts with Customers
The Company generates Software Platform and Apps revenue. Software Platform revenue is generated from fees paid by advertisers who use our Software Platform. The Company generates Apps revenue from both consumers and business clients. Consumer revenue is generated from in-app purchases (“IAPs”) made by users within the Company’s apps (“Apps”). Business revenue is generated from advertisers that purchase ad inventory from Apps.
10

Software Platform Revenue
The Software Platform provides the technology to match advertisers and third-party owners of digital advertising inventory (“Publishers”) via auctions at large scale and microsecond-level speeds. The pricing and terms for all mobile advertising arrangements are governed by the Company’s terms and conditions and generally stipulate payment terms of 30 days subsequent to the end of the month. The contract is fully cancellable at any time.
Software Platform Revenue is generated by placing ads on mobile applications owned by Publishers. The Company’s performance obligation is to provide an advertiser with access to the Software Platform, which facilitates the advertiser’s purchase of ad inventory from Publishers. The Company does not control the ad inventory prior to its transfer to the advertiser, the Company’s customer, because the Company does not have the substantive ability to direct the use of nor obtain substantially all of the remaining benefits from the ad inventory. The Company is not primarily responsible for fulfillment and does not have any inventory risk. The Company is an agent as it relates to the sale of third-party advertising inventory and presents revenue on a net basis. The transaction price is the product of the number of completions of agreed upon actions less consideration paid or payable to Publishers.
Apps Revenue
Consumer Revenue
Consumer Revenue includes fees collected from users to purchase virtual goods to enhance their gameplay experience. The identified performance obligation is to provide users with the ability to acquire, use, and hold virtual items over the estimated period of time the virtual items are available to the user or until the virtual item is consumed. Payment is required at the time of purchase, and the purchase price is a fixed amount.
Users make IAPs through the Company’s distribution partners. The transaction price is equal to the gross amount charged to users because the Company is the principal in the transaction. IAPs fees are non-refundable. Such payments are initially recorded as deferred revenue. The Company categorizes its virtual goods as either consumable or durable. Consumable virtual goods represent goods that can be consumed by a specific player action in gameplay; accordingly, the Company recognizes revenue from the sale of consumable virtual goods as the goods are consumed. Durable virtual goods represent goods that are accessible to the user over an extended period of time; accordingly, the Company recognizes revenue from the sale of durable virtual goods ratably over the period of time the goods are available to the user, which is generally the estimated average user life (“EAUL”).
The EAUL represents the Company’s best estimate of the expected life of paying users for the applicable game. The EAUL begins when a user makes the first purchase of durable virtual goods and ends when a user is determined to be inactive. The Company determines the EAUL on a game-by-game basis. For a newly launched game with limited playing data, the Company determines its EAUL based on the EAUL of a game with sufficiently similar characteristics.
The Company determines the EAUL on a quarterly basis and applies such calculated EAUL to all bookings in the respective quarter. Determining the EAUL is subjective and requires management’s judgment. Future playing patterns may differ from historical playing patterns, and therefore the EAUL may change in the future. The EAULs are generally between six and nine months.
Business Revenue
Business Revenue is generated by selling ad inventory on the Company's Apps to third-party advertisers. Advertisers purchase ad inventory either through the Software Platform or through third-party advertising networks (“Ad Networks”). Revenue from the sale of ad inventory through Ad Networks is recognized net of the amounts retained by Ad Networks as the Company is unable to determine the gross amount paid by the advertisers to Ad Networks. The Company recognizes revenue when the ad is displayed to users.
Asset Acquisitions and Business Combinations
The Company performs an initial test to determine whether substantially all of the fair value of the gross assets transferred are concentrated in a single identifiable asset or a group of similar identifiable assets, such that the acquisition would not represent a business. If that test suggests that the set of assets and activities is a business, the Company then performs a second test to evaluate whether the assets and activities transferred include inputs and substantive processes that together, significantly contribute to the ability to create outputs, which would constitute a business. If the result of the second test suggests that the acquired assets and activities constitute a business, the Company accounts for the transaction as a business combination.
11

For transactions accounted for as business combinations, the Company allocates the fair value of acquisition consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. Acquisition consideration includes the fair value of any promised contingent consideration. The excess of the fair value of acquisition consideration over the fair value of acquired identifiable assets and liabilities is recorded as goodwill. Contingent consideration is remeasured to its fair value each reporting period with changes in the fair value of contingent consideration recorded in general and administrative expenses. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable, and as a result, actual results may differ from estimates. In certain circumstances, the allocations of the excess purchase price are based upon preliminary estimates and assumptions and subject to revision when the Company receives final information, including appraisals and other analyses. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Acquisition-related costs are expensed as incurred.
For transactions accounted for as asset acquisitions, the cost, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. The Company generally includes contingent consideration in the cost of the assets acquired only when the uncertainty is resolved. The Company recognizes contingent consideration adjustments to the cost of the acquired assets prospectively using the straight-line method over the remaining useful life of the assets. No goodwill is recognized in asset acquisitions.
Services and Development Agreements
The Company enters into strategic agreements with mobile gaming studios (“Partner Studios”). The Company has historically allowed these Partner Studios to continue their operations with a significant degree of autonomy. In some cases, the Company bought Apps from Partner Studios and entered into service and development agreements whereby Partner Studios provide support in improving existing Apps and developing new Apps. The substantial majority of payments associated with service agreements for existing Apps are expensed to research and development when the services are rendered as the payments primarily relate to developing enhancements for the Apps. Payments for new Apps associated with development agreements are generally made in connection with the development of a particular App, and therefore, the Company is subject to development risk prior to the release of the App. Accordingly, payments that are due prior to completion of an App are generally expensed to research and development over the development period as the services are incurred. Payments due after completion of an App are generally capitalized and expensed as cost of revenue. See Note 6, “Acquisitions” for additional information.
Recent Accounting Pronouncements (Issued and Adopted)
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The standard eliminates beneficial conversion feature and cash conversion models resulting in more convertible instruments being accounted for as a single unit; and simplifies classification of debt on the balance sheet and earnings per share calculation. The Company adopted this ASU on January 1, 2022 with no material impact on the consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business CombinationsAccounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606).The Company adopted this ASU on January 1, 2022 with no material impact on the consolidated financial statements.
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3. Revenue
Disaggregation of Revenue
The following table presents revenue disaggregated by type (in thousands):
Three Months Ended March 31,
20222021
Software Platform Revenue$118,840 $88,419 
Consumer Revenue339,472 358,495 
Business Revenue167,109 156,963 
Apps Revenue506,581 515,458 
Total Revenue$625,421 $603,877 
Revenue disaggregated by geography, based on user location, consists of the following (in thousands):
Three Months Ended March 31,
20222021
United States$380,567 $366,166 
Rest of the World244,854 237,711 
Total Revenue$625,421 $603,877 
Contract Balances
Contract liabilities consist of deferred revenue and include payments received in advance of the satisfaction of performance obligations. During the three months ended March 31, 2022 and 2021, the Company recognized $55.8 million and $57.7 million of revenue that was included in deferred revenue as of December 31, 2021 and 2020, respectively.
Unsatisfied Performance Obligations
All of the Company’s unsatisfied performance obligations relate to contracts with an original expected length of one year or less.
Publisher Bonuses
During the first quarter of 2022, the Company paid or promised to pay a total of $209.6 million in bonuses to publishers consisting primarily of non-recurring bonuses to migrate publishers to MAX. The Company accounted for such publisher bonuses as a reduction to revenue since the publishers receiving such bonuses are also customers of the Company.
4. Fair Value Measurements
Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. At March 31, 2022 and December 31, 2021, the carrying amount of cash and cash equivalents, accounts receivable, other current assets, other assets, accounts payable, and accrued and other current liabilities approximated their estimated fair value due to their relatively short maturities. The following table sets forth the Company’s financial instruments that were measured at fair value by level within the fair value hierarchy on a recurring basis as of the dates indicated (in thousands):
As of March 31, 2022
Balance Sheet LocationTotalLevel 1Level 2Level 3
Financial Assets:
Unrestricted Balances
Money market fundsCash and cash equivalents$930,955 $930,955 $ $ 
Total financial assets$930,955 $930,955 $ $ 


As of December 31, 2021
Balance Sheet LocationTotalLevel 1Level 2Level 3
Financial Assets:
Unrestricted Balances
Money market fundsCash and cash equivalents$1,070,979 $1,070,979 $ $ 
Marketable equity securitiesPrepaid expenses and other current assets$2,532 $2,532   
Restricted Balances
Money market fundsRestricted cash equivalents1,050,000 1,050,000   
Total financial assets$2,123,511 $2,123,511 $ $ 
Marketable Equity Securities
During the three months ended March 31, 2022, the Company liquidated its investment in Huuuge, Inc. for a total proceed of $2.1 million and recognized a loss of $0.4 million on sale of such investment in other income, net in the Company's condensed consolidated statement of operations. For the three months ended March 31, 2021, the Company recorded a total unrealized gain of $5.4 million in other income, net in the Company’s condensed consolidated statement of operations related to this investment.
Non-Marketable Equity Securities
The Company held equity interests in certain private equity funds of $18.9 million and $3.2 million as of March 31, 2022 and December 31, 2021, respectively, which are measured using the net asset value practical expedient. Under the net asset value practical expedient, the Company records its investments based on its proportionate share of the underlying funds’ net asset value as of the Company's reporting date. These investments are included in other assets in the Company’s condensed consolidated balance sheets.
These funds vary in investment strategies and generally have an initial term of 7 to 10 years, which may be extended for 2 to 3 additional years with the applicable approval. These investments are subject to certain restrictions regarding transfers and withdrawals and generally cannot be redeemed with the funds. Distributions from the funds will be received as the underlying investments are liquidated. The Company’s maximum exposure to loss is limited to the carrying value of these investments plus the unfunded commitments of $44.1 million as of March 31, 2022.
During the three months ended March 31, 2022, the Company made a total capital contribution of $14.1 million related to these investments and recorded an unrealized gain of $1.6 million in other income, net in the Company’s condensed consolidated statement of operations. The Company did not have such investments in the first quarter of 2021.
5. Commitments and Contingencies
Commitments
As of March 31, 2022, the Company's non-cancelable minimum purchase commitments comprised primarily of a certain arrangement related to cloud platform services entered into in May 2021 with a remaining unpaid commitment of $226.8 million through May 2026. In addition, the Company had total unfunded commitments of $44.1 million related to its investments in certain private equity funds (see Note 4).
Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.
Letters of Credit
As of March 31, 2022 and December 31, 2021 the Company had outstanding letters of credit in the aggregate amount of $11.1 million, which were issued as security for certain leased office facilities under the Credit Agreement. These letters of credit have never been drawn upon.
Legal Proceedings
The Company is involved from time to time in litigation, claims, and proceedings. The outcomes of the Company’s legal proceedings are inherently unpredictable and subject to significant uncertainty.
14

The Company records a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. If it is determined that a loss is reasonably possible and the loss or range of loss can be estimated, the reasonably possible loss is disclosed. The Company evaluates developments in legal matters that could affect the amount of liability that has been previously accrued, and related reasonably possible losses disclosed, and makes adjustments as appropriate. Significant judgment is required to determine the likelihood of matters and the estimated amount of losses related to such matters. To date, losses in connection with legal proceedings have not been material.
The Company expenses legal fees in the period in which they are incurred.
Indemnifications
The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including certain customers, business partners, investors, contractors and the Company’s officers, directors and certain employees. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in the Company’s condensed consolidated statements of operations in connection with the indemnification provisions have not been material. As of March 31, 2022, the Company did not have any material indemnification claims that were probable or reasonably possible.
Non-income Taxes
The Company may be subject to audit by various tax authorities with regard to non-income tax matters. The subject matter of non-income tax audits primarily arises from different interpretations on tax treatment and tax rates applied. The Company accrues liabilities for non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the reasonably possible loss.
6. Acquisitions
2022 Acquisitions
Business Combinations
MoPubOn January 1, 2022, the Company completed its acquisition from Twitter, Inc. of certain assets that comprised of its MoPub business for a total purchase price of $1.03 billion in cash. The acquisition allows the Company to integrate certain product features of the MoPub platform into MAX, our own in-app mediation platform, and migrate publishers and demand partners from the MoPub platform to MAX. The Company accounted for the acquisition as a business combination. The Company recognized $12.8 million and $1.6 million of transaction costs in general and administrative expenses during three months ended March 31, 2022 and the year ended December 31, 2021, respectively.
The following table summarizes the preliminary allocation of the purchase consideration to the fair value of the assets acquired (in thousands):
As of March 31, 2022
Intangible assets
Advertiser Relationships—estimated useful life of 9 years
$212,700 
Publisher Relationships—estimated useful life of 9 years
123,300 
Developed Technology—estimated useful life of 5 years
61,800 
Tradename—estimated useful life of 3 months
60 
Goodwill632,472 
Total purchase consideration$1,030,332 
The fair values assigned to the assets acquired are based on the Company's best estimates and assumptions as of the reporting date. No liabilities were assumed in the transaction. The Company has completed a preliminary valuation and expects to finalize it as soon as practical, but no later than one year from the acquisition date.
The income approach was used to determine the preliminary fair value of the advertiser relationships, publisher relationships, developed technology and tradename. Goodwill represents the excess of the purchase price over the preliminary fair value of identifiable assets acquired at the acquisition date and is primarily attributable to
15

the assembled workforce and expected synergies at the time of the acquisition. For tax purposes, an estimated tax deductible goodwill of $694.5 million was generated as a result of this acquisition.
Contemporaneously with the signing of the asset purchase agreement, the Company entered into an agreement for Twitter, Inc. to provide certain transitional services to facilitate the migration of publishers and demand partners to MAX during a three-month transitional period following the closing of the transaction (the "TSA"). The Company accounted for the TSA as a transaction separate from the business combination since it was negotiated primarily for the benefit of the Company. During the three months ended March 31, 2022, the Company recognized total expense of $7.0 million related to the transitional services, which was included primarily in cost of revenue in the Company's condensed consolidated statement of operations.
The Company’s condensed consolidated statement of operations for the three months ended March 31, 2022 includes revenue generated from the MoPub business during the transitional period of $44.1 million. However, due to the significant integration of the MoPub business with MAX, it was impractical to determine the impact of the acquired business on earnings.
The unaudited supplemental pro forma information below presents the combined historical results of operations of the Company and the MoPub business for each of the periods presented as if the MoPub business had been acquired as of January 1, 2021 (in thousands):
Three Months Ended
March 31,
20222021
Revenue$625,421 $640,800 
Net loss(99,932)(23,831)
The unaudited supplemental pro forma information above includes the following adjustments to net loss in the appropriate pro forma periods (in thousands):
Three Months Ended
March 31,
20222021
A decrease (increase) in amortization expense related to the fair value of acquired identifiable intangible assets, net of the amortization expense already reflected in actual historical results$60 $(12,922)
A decrease (increase) in expenses related to the TSA $7,000 $(7,000)
A decrease (increase) in expenses related to transaction costs$12,848 $(12,848)
A decrease (increase) in income tax provision$(4,564)$7,500 
Asset Acquisitions
During the three months ended March 31, 2022, the Company recognized total earn-out costs of $31.7 million related to asset acquisitions closed in 2021 and prior. These earn-out costs increased the book value of the acquired mobile Apps, and are amortized over the remaining useful life of the originally acquired mobile Apps. No other asset acquisition was completed during the three-month period ended March 31, 2022.
2021 Acquisitions
Asset Acquisitions
During the three months ended March 31, 2021, the Company recognized total earn-out costs of $31.9 million, of which $27.5 million and $4.4 million related to asset acquisitions that closed in 2020 and 2019, respectively. These earn-out costs increased the book value of the acquired mobile Apps, and are amortized over the remaining useful life of the originally acquired mobile Apps. No other asset acquisition was completed during the three-month period ended March 31, 2021.
7. Goodwill and Intangible Assets, Net
The following table presents goodwill activity (in thousands):
December 31, 2021$966,427 
Goodwill acquired632,472 
Foreign currency translation(13,971)
March 31, 2022$1,584,928 
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Intangible assets, net consisted of the following (in thousands):
 Weighted-
Average
Remaining
Useful Life
(Years)
As of March 31, 2022As of December 31, 2021
 Gross
Carrying
Value
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Value
Accumulated
Amortization
Net Book
Value
 
 
Long-lived intangible assets:
Apps4.9$1,970,743 $(619,754)$1,350,989 $1,939,180 $(529,012)$1,410,168 
Customer Relationships9.5479,125 (21,036)458,089 145,870 (8,442)137,428 
User base4.068,817 (29,807)39,010 68,817 (27,369)41,448 
License asset1.325,640 (4,273)21,367 25,640  25,640 
Developed technology4.9148,424 (28,268)120,156 87,851 (21,435)66,416 
Other5.036,471 (7,984)28,487 34,895 (6,648)28,247 
Total long-lived intangible assets2,729,220 (711,122)2,018,098 2,302,253 (592,906)1,709,347 
Short-lived intangible assets:
Apps0.443,151 (40,940)2,211 40,348 (38,724)1,624 
Total intangible assets$2,772,371 $(752,062)$2,020,309 $2,342,601 $(631,630)$1,710,971 
As of March 31, 2022 and December 31, 2021, short-lived mobile Apps were included in prepaid expenses and other current assets.
The Company recorded amortization expenses related to acquired intangible assets as follows (in thousands):
Three Months Ended March 31,
20222021
Cost of revenue$104,619 $82,185 
Sales and marketing16,392 3,209 
Total$121,011 $85,394 
8. Common Stock
In February 2022, the Company's Board authorized the repurchase of up to $750.0 million of the Company’s Class A common stock. Repurchases may be made from time to time through open market purchases or through privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company may also, from time to time, enter into Rule 10b-5 trading plans, under the Exchange Act, to facilitate repurchases of its shares. The repurchase program does not obligate the Company to acquire any particular amount of its Class A common stock, has no expiration date and may be modified, suspended or terminated at any time at the Company's discretion. As of March 31, 2022, the Company repurchased 893,556 shares of our Class A common stock for an aggregate amount of $43.7 million.
9. Stock-based Compensation
The Company maintains the 2021 Equity Incentive Plan, the 2021 Partner Studio Incentive Plan and the 2021 Employee Stock Purchase Plan, all of which were adopted by the Board and approved by its stockholders.
2021 Equity Incentive Plan
The 2021 Equity Incentive Plan (the “2021 Plan”) provides for the grant of restricted stock units ("RSUs"), incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), restricted stock, stock appreciation rights ("SARs"), performance units, and performance shares to the Company’s employees, directors, consultants and other service providers. The total shares of the Company’s Class A common stock that were initially reserved for issuance under the 2021 Plan was 39,000,000, and provides for an annual increase of shares equal to the least of (a) 39,000,000 shares, (b) five percent (5%) of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding fiscal year, or (c) such other amount as the Company’s Board may determine. During the three months ended March 31, 2022, the Board decreased the number of shares of Class A common stock reserved for issuance under the 2021 Plan by 2,000,000 shares.
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In the three months ended March 31, 2022 the Company granted 904,773 RSUs to certain employees under the 2021 Plan at the weighted average grant date fair value of $69.98 per RSU. The RSUs generally vest over an approximate period of four to five years of continuous service from their respective vesting commencement dates.
2021 Partner Studio Incentive Plan
The 2021 Partner Studio Incentive Plan (the “2021 Partner Plan”) provides for the grant of RSUs, ISOs, NSOs, SARs, performance units, and performance shares to individuals or entities engaged by the Company or a parent or subsidiary of the Company to render bona fide services to the party engaging such individual or entity. A total of 390,000 shares of the Company’s Class A common stock are reserved for issuance pursuant to the 2021 Partner Plan. During the three months ended March 31, 2022, the Board reserved an additional 2,000,000 shares of Class A common stock for issuance under the 2021 Partner Plan.
In the three months ended March 31, 2022 the Company granted 125,255 RSUs under the 2021 Partner Plan. The RSUs generally vest over an approximate period of four to five years of continuous service and have a grant date fair value of $48.18 per RSU.
2021 Employee Stock Purchase Plan
The ESPP permits participants to purchase shares of the Company’s Class A common stock through contributions of up to 15% of their eligible compensation. The ESPP provides for consecutive, overlapping overlapping 24-month offering periods, during which the contributed amount by the participant will be used to purchase shares of the Company’s Class A common stock at the end of each 6-month purchase period with the purchase price of the shares being 85% of the lower of the fair market value of the Company’s Class A common stock on the first day of an offering period or on the exercise date. A participant may purchase a maximum of 590 shares of the Company’s Class A common stock during a purchase period. Participants may end their participation at any time during an offering and will be paid their accrued contributions that have not yet been used to purchase shares. Participation ends automatically upon termination of employment with the Company.
A total of 7,800,000 shares of the Company’s Class A common stock are available for sale under the ESPP and provides for an annual increase of shares equal to the least of: (a) 7,800,000 shares, (b) one percent (1%) of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding fiscal year, or (c) such other amount as the Company’s board of directors may determine. In the three months ended March 31, 2022 there were no purchases of shares under the ESPP.
The Company recognized stock-based compensation expense for the periods indicated as follows (in thousands):
Three Months Ended March 31,
20222021
Cost of revenue$1,052 $109 
Sales and marketing6,919 1,819 
Research and development20,629 6,465 
General and administrative16,040 21,566 
Total$44,640 $29,959 
For the three months ended March 31, 2022 and 2021, total stock-based compensation expense included $0.3 million and $0.3 million associated with awards that may be settled in stock of one of the Company’s subsidiaries, respectively.
Early Exercise of Stock Options—As of March 31, 2022 and December 31, 2021 the Company had 635,873 and 486,999 shares of Class A common stock subject to repurchase in connection with early exercised stock options, respectively. The liability for the shares subject to repurchase as of March 31, 2022 and December 31, 2021 was $3.0 million and $1.4 million, respectively, which was included in accrued liabilities in the Company’s condensed consolidated balance sheets.
During 2020 and 2019, the Company provided financing to certain employees in the form of promissory notes to early exercise stock options. These promissory notes are partially collateralized by shares and, for accounting purposes, in-substance are nonrecourse. For accounting purposes, exercised options via nonrecourse promissory notes are not substantive and are continued to be treated as options. In February 2021, promissory notes issued to executive officers in the amount of $20.9 million were settled through either share repurchase, in the amount of $17.2 million, or cash payment, in the amount of $3.7 million. In connection with the repurchase of shares, the
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Company accelerated vesting of 60,968 shares of Class A common stock for one of the Company’s officers. The acceleration of vesting was accounted as an option modification with an immaterial impact to the stock-based compensation expense. As of March 31, 2022 and December 31, 2021, the Company had 2,434,999 and 2,884,999 shares of Class A common stock options, respectively, that were exercised via nonrecourse promissory notes, of which 275,105 and 663,856 shares, were unvested and subject to repurchase, respectively. The principal balances of nonrecourse promissory notes outstanding amounted to $11.8 million and $15.1 million as of March 31, 2022 and December 31, 2021, respectively.
10. Earnings Per Share
Basic and diluted net loss per share attributable to common stockholders is computed in conformity with the two-class method required for participating securities. The Company considers its convertible preferred stock, options exercised in exchange for nonrecourse promissory notes, early exercised unvested stock options and unvested restricted stock awards to be participating securities. Under the two-class method, the net loss attributable to common stockholders is not allocated to convertible preferred stock, options exercised in exchange for nonrecourse promissory notes, early exercised unvested common stock options and unvested restricted stock awards as the holders of these instruments do not have a contractual obligation to share in the Company’s losses. Net income is attributed to common stockholders and participating securities based on their participation rights. Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):
Three Months Ended March 31,
20222021
Basic and Diluted EPS
Numerator:
Net loss per attributable to common stockholders$(115,257)$(10,521)
Denominator:
Weighted average common shares used to compute net loss per share attributable to common stockholders, basic and diluted371,967,881 222,408,568 
Net loss per share attributable to common stockholders, basic and diluted$(0.31)$(0.05)
The following table presents the forms of antidilutive potential common shares:
As of March 31,
20222021
Convertible preferred stock 109,090,908 
Stock options exercised for promissory notes2,434,999 3,874,999 
Early exercised stock options635,873 458,499 
Unvested RSAs121,158 782,895 
Stock options14,409,668 19,581,567 
Unvested RSUs7,628,274  
ESPP239,378  
Total antidilutive potential common shares25,469,350 133,788,868 
The table above does not include the convertible security issued in 2020. The sellers converted the convertible security in 2021.
11. Income Taxes
The Company is subject to income taxes in the U.S. and in foreign jurisdictions. The Company bases its interim tax accruals on an estimated annual effective tax rate applied to year-to-date income and record the discrete tax items in the period to which they relate. In each quarter, the Company updates its estimated annual effective tax rate and makes a year-to-date adjustment to its tax provision as necessary. The Company’s calendar year 2022 annual effective tax rate differs from the U.S. statutory rate primarily due to stock-based compensation expenses,
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foreign derived intangible income deduction, global intangible low-taxed income, valuation allowance against losses which cannot be realized and the foreign tax rate differential.
During the three months ended March 31, 2022, there were no material changes to the Company's unrecognized tax benefits, and the Company does not expect material changes in its unrecognized tax benefits within the next twelve months.
12. Related Party Transactions
On February 12, 2021, the Company amended its credit agreement that provides for senior secured credit consisting of term loans and a revolving credit facility, with varying maturity dates through 2028. In connection with this amendment, the Company paid $0.8 million in fees to KKR Capital Markets LLC, which is affiliated with KKR Denali Holdings L.P. ("KKR Denali"), one of the Company’s principal stockholders.
On March 31, 2021, the Company drew down an additional $250.0 million from the Company’s $600.0 million revolving credit facility. A lender under the revolving credit facility is an affiliate of KKR Denali, a principal stockholder of the Company.
The Company had no other material related party transactions for the three months ended March 31, 2022 and 2021.
13. Subsequent Events
In April 2022, the Company completed its previously announced acquisition of all of the equity interests of Wurl, Inc. ("Wurl"), a connected TV software platform, for a total purchase price of approximately $379.0 million, consisting of $220.0 million in cash, 2,579,692 shares of the Company's Class A common stock valued at $137.0 million and a liability of $22.0 million relating to an indemnity holdback amount to be paid in 18 months following the closing of the transaction. The transaction will enable the Company to expand into the Connected TV market. The acquisition will be accounted for as a business combination and, accordingly, the total purchase price will be allocated to the assets acquired and liabilities assumed at their respective fair values on the acquisition date. Due to the timing of the close, as of the date of issuance of these condensed consolidated financial statements, the acquisition accounting is incomplete as the Company is still in the process of estimating the initial purchase price allocation. As a result, the Company is unable to provide this information as well as the pro forma financial information of the combined entity, which will be reported on its Form 10-Q for the quarter ending June 30, 2022. The Company incurred transaction costs of approximately $1.7 million included in the general and administrative expenses for the three months ended March 31, 2022, in connection with the business combination for legal and accounting fees. Concurrent with entering into the definitive agreement, the Company also adopted a multi-year performance-based incentive plan for certain key employees of Wurl, under which the key employees may earn up to a total of $600.0 million in additional shares of the Company's Class A common stock through 2025, contingent upon the achievement of certain revenue and other performance targets by the acquired business and the continued employment of such key employees. Such plan became effective at the closing of the transaction.
In April 2022, the Company granted 1,192,676 RSUs under the 2021 Plan to new employees who joined the Company in connection with the acquisition of Wurl. Such RSUs include vesting terms of approximately four years, subject to continuous employment, and have a grant date fair value of $46.74 per share.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors” and other parts of this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
Our mission is to grow the mobile app ecosystem by enabling the success of mobile app developers. Our software solutions provide advanced tools for mobile app developers to grow their businesses by automating and optimizing the marketing and monetization of their apps. Our software, coupled with our deep industry knowledge and expertise, has allowed us to rapidly scale a successful and diversified portfolio of owned mobile apps. We have also accelerated our market penetration through an active acquisition and partnership strategy. Our scaled and integrated business model sits at the nexus of the mobile app ecosystem, which creates a durable competitive advantage that has fueled our clients’ success and our strong growth.
Since our founding in 2011, we have been focused on building a software-based platform for mobile app developers to improve the marketing and monetization of their apps. Our founders, who are mobile app developers themselves, quickly realized the real impediment to success and growth in the mobile app ecosystem was a discovery and monetization problem—breaking through the congested app stores to efficiently find users and successfully grow their business. Their first-hand experience with these developer challenges led to the development of our infrastructure and software—AppLovin Core Technologies and AppLovin Software Platform. We capitalized on our success and understanding of the mobile app ecosystem by launching AppLovin Apps in 2018. Our Apps now consist of a globally diversified portfolio of over 350 free-to-play mobile games across five genres, run by nineteen studios.
For the three months ended March 31, 2022, our revenue grew 4% year-over-year, from $603.9 million for the three months ended March 31, 2021 to $625.4 million in the comparative period in 2022. We generated a net loss of $115.3 million for the three months ended March 31, 2022, and a net loss of $10.6 million in the comparative period in 2021. We generated Adjusted EBITDA of $276.2 million, and $131.1 million for the three months ended March 31, 2022 and 2021, respectively. Additionally, our net cash provided by (used in) operating activities was $31.7 million and $61.8 million in the three months ended March 31, 2022 and 2021, respectively. See the section titled “Non-GAAP Financial Metrics” for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP.
Our Business Model
We collect revenue from our Software Platform and our Apps. During the three months ended March 31, 2022, Software Platform Revenue represented 19% of total revenue and Apps Revenue represented 81% of total revenue.
As a result of the strategic review of our Apps portfolio, which we announced in our shareholder letter on May 11th, 2022 and which we discuss below, we have updated the presentation of our revenue and associated discussion within this filing to align with how our management reviews our revenue and financial performance.
Software Platform Revenue
We generate Software Platform Revenue from fees paid by mobile app advertisers who use our Software Platform to grow and monetize their apps. We are able to grow our Software Platform Revenue by improving our various software technologies.
Software Platform clients include a wide variety of advertisers, from indie developer studios to some of the largest global internet platforms, such as Facebook and Google. While we have thousands of clients as of March 31, 2022, the vast majority of our revenue is derived from our Software Platform Enterprise Clients. See “Key Metrics” below for additional information on how we calculate Software Platform Enterprise Clients. We see multiple opportunities to gain new Software Platform clients, and to increase spend from existing clients, as we help them grow their businesses and make them more successful.
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Our Software Platform includes AppDiscovery, Adjust and MAX. Clients use AppDiscovery to automate, optimize, and manage their user acquisition investments. They set marketing and user growth goals, and AppDiscovery optimizes their ad spend in an effort to achieve their return on advertising spend targets and other marketing objectives. AppDiscovery comprises the vast majority of revenue from our Software Platform. Revenue is generated from our advertisers, typically on a performance-based, cost-per-install basis, and shared with our advertising publishers, typically on a cost per impression model. Our Software Platform Enterprise Clients had a Net Dollar-Based Retention Rate of approximately 137% for the three months ended March 31, 2022.1
Software Platform clients use Adjust's SaaS mobile marketing platform to better understand their users' journey while allowing marketers to make smarter decisions through measurement, attribution and fraud prevention. Revenue from Adjust is primarily generated from an annual software subscription fee.
Software Platform clients use MAX to optimize purchases of app advertising inventory. The Compass Analytics tool within MAX provides insights to manage against key performance indicators, understand the long-term value of users, and help manage profitability. Revenue from MAX is generated based on a percentage of client spend. As more developers move to in-app bidding monetization, we expect growth in the adoption of, and revenue from, MAX.
Apps Revenue
Apps Revenue is generated when a user of one of our Apps makes an in-app purchase ("IAP") ("Consumer Revenue") and when clients purchase the digital advertising inventory of our portfolio of Apps ("Business Revenue"). We are able to grow our Apps Revenue by adding more apps to our Apps portfolio and increasing engagement on our existing Apps.
Our Apps are generally free-to-play mobile games and generate Consumer Revenue through IAPs. IAPs consist of virtual goods used to enhance gameplay, accelerate access to certain features or levels, and augment other mobile game progression opportunities for the user. IAPs drive more engagement and better economics from our Apps. The vast majority of our IAP revenue flows through two app stores, Apple App Store and Google Play, which charge us a standard commission on IAPs. Consumer Revenue represented 67% of total Apps Revenue in the three months ended March 31, 2022.
During the three months ended March 31, 2022, we had an average of 2.7 million Monthly Active Payers ("MAPs") across our portfolio of Apps. Over that period, we had an Average Revenue Per Monthly Active Payer ("ARPMAP") of $41. Leveraging the benefit of our integrated Platform and Apps, we see opportunities to grow our App-related revenue streams by increasing MAPs and expanding ARPMAP within existing games and through new game development, acquisitions and partnerships. See “Key Metrics” below for additional information on how we calculate MAPs and ARPMAP.
Business clients that purchase advertising inventory from our Apps are able to target highly relevant users from our diverse and global portfolio of over 350 mobile games. Our clients leverage a broad set of high-performing mobile ad formats, including playable and rewarded video, and are able to match these ads with relevant users resulting in a better return on their advertising spend. By increasing the number of users and their engagement, as well as better matching ads with the appropriate target audience, we are able to increase our revenue from business clients that purchase advertising inventory from our Apps. Revenue from business clients related to our Apps is generated from ads purchased by advertisers, as well as from revenue-sharing agreements between some of our studios and a selection of third-party studios for which they publish and monetize games. Business Revenue represented 33% of total Apps Revenue in the three months ended March 31, 2022.

1 We measure Net Dollar-Based Retention Rate for the three months ended March 31, 2022 for our Software Platform Enterprise Clients as current period revenue divided by prior period revenue. Prior period revenue is measured as revenue for the three months ended March 31, 2021 from our Software Platform Enterprise Clients as of March 31, 2021. Current period revenue is revenue for the three months ended March 31, 2022 from Software Platform Enterprise Clients as of March 31, 2021. See the section titled "Key Metrics--Update to our Key Metrics" below.
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Key Metrics
We review the following key metrics on a regular basis in order to evaluate the health of our business, identify trends affecting our performance, prepare financial projections, and make strategic decisions.
Software Platform Enterprise Clients ("SPECs"). We focus on the number of Software Platform Enterprise Clients, which are third-party clients from whom we have collected greater than $31,250 of Software Platform revenue in the three months to a given date, equating to an annual run-rate of $125,000 in revenue. Software Platform Enterprise Clients generate the vast majority of our Business Revenue - Software Platform and Business Revenue - Software Platform growth.
Revenue Per Software Platform Enterprise Client ("Revenue per SPEC"). We define Revenue per SPEC as (i) the total revenue derived from our Software Platform Enterprise Clients in a three-month period, divided by (ii) Software Platform Enterprise Clients as of the end of that same period. Revenue per SPEC shows how efficiently we are monetizing each SPEC. We expect to increase Revenue per SPEC over time as we enhance our Software Platform and Apps.
The following table shows our Software Platform Enterprise Clients and Revenue per SPEC for the three months March 31, 2022 and 2021.
Three Months Ended
March 31,
20222021
Software Platform Enterprise Clients481 193 
Revenue per SPEC (thousands)$553 $453 
Update to our Key Metrics
Beginning with the three months ended June 30, 2022, the revenue measurement period used to determine the number of SPECs in a period will be updated to include clients from whom we have collected greater than $125,000 in Software Platform revenue over the trailing 12 months. The current definition of SPEC includes third-party clients who had more than $31,250 in Software Platform revenue for the prior three months. We believe this change in revenue measurement period will provide additional information regarding the scale and growth of our more-mature clients. Going forward, when Net Dollar-Based Revenue Retention ("NDBRR") measures are provided, we will also calculate such measures using the updated definition of SPECs.
The table below shows our SPEC and Revenue per SPEC as of March 31, 2022 and 2021 under the updated calculations.
Twelve Months Ended
March 31,
20222021
SPEC (trailing 12 months)447 156 
Revenue per SPEC (trailing 12 months) (in thousands)
$1,701 $1,544 
Total Software Transaction Value ("TSTV"). Software Platform revenue is from third-party clients using our Software Platform to find new customers. We do not recognize revenue from our own spend on our Software Platform. Therefore, we use TSTV to measure the scale and growth rates of our Software Platform, as it reflects the total value on our Software Platform including our first-party studios as though they were stand-alone businesses.
The following table shows our Total Software Transaction Value for the three months ended March 31, 2022 and 2021.
Three Months Ended
March 31,
20222021
Total Software Transaction Value$185,640 $147,901 
Monthly Active Payers ("MAPs"). We define a MAP as a unique mobile device active on one of our Apps in a month that completed at least one IAP during that time period. A consumer who makes IAPs within two separate Apps on the same mobile device in a monthly period will be counted as two MAPs. MAPs for a particular time period longer than one month are the average MAPs for each month during that period. We estimate the number of MAPs by aggregating certain data from third-party attribution partners. Some of our Apps do not utilize such third-party attribution partners, and therefore our MAPs figure for any period does not capture every user that completed an
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IAP on our Apps. We estimate that our counted MAPs generated approximately 97% of our Consumer Revenue during the three months ended March 31, 2022, and as such, management believes that MAPs are still a useful metric to measure the engagement and monetization potential of our games. We expect to increase our MAPs over time as we increase the number of our Apps and enhance the engagement and monetization of our Apps.
Average Revenue Per Monthly Active Payer ("ARPMAP"). We define ARPMAP as (i) the total Consumer Revenue derived from our Apps in a monthly period, divided by (ii) MAPs in that same period. ARPMAP for a particular time period longer than one month is the average ARPMAP for each month during that period. ARPMAP shows how efficiently we are monetizing each MAP. We expect to increase ARPMAP over time as we enhance the monetization of our Apps.
The following table shows our Monthly Active Payers and Average Revenue Per Monthly Active Payer for the three months ended March 31, 2022 and 2021.
Three Months Ended
March 31,
20222021
Monthly Active Payers (millions)2.7 3.1 
Average Revenue Per Monthly Active Payer$41 $38 
Our key metrics are not based on any standardized industry methodology and are not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, our key metrics may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology. The numbers that we use to calculate TSTV, MAP, and ARPMAP are based on internal data. While these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.
Non-GAAP Financial Metrics
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA for a particular period as net income (loss) before interest expense and loss on settlement of debt, other (income) expense, net (excluding certain recurring items), provision for (benefit from) income taxes, amortization, depreciation and write-offs and as further adjusted for stock-based compensation expense, acquisition-related expense and transaction bonus, publisher bonuses, MoPub acquisition transition services, loss (gain) on extinguishments of acquisition related continent consideration, non-operating foreign exchange losses, lease modification and abandonment of leasehold improvements, and change in the fair value of contingent consideration. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue for the same period.
Adjusted EBITDA and Adjusted EBITDA margin are key measures we use to assess our financial performance and are also used for internal planning and forecasting purposes. We believe Adjusted EBITDA and Adjusted EBITDA margin are helpful to investors, analysts, and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors, and other interested parties to evaluate and assess performance. We use Adjusted EBITDA and Adjusted EBITDA margin in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance.
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and are presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to financial information presented in accordance with GAAP. These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statement of operations that are necessary to run our business. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Furthermore, these metrics have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statement of operations that are necessary to run our business. Thus, our Adjusted EBITDA and Adjusted EBITDA margin should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.
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The following table provides our Adjusted EBITDA and Adjusted EBITDA margin for the three months ended March 31, 2022 and 2021, and a reconciliation of net loss to Adjusted EBITDA:
Three Months Ended
March 31,
20222021
(in thousands. except percentages)
Net loss$(115,298)$(10,575)
Adjusted as follows:
Interest expense and loss on settlement of debt32,00935,010
Other income, net2(2,417)(8,626)
Benefit from income taxes(42,684)(3,180)
Amortization, depreciation and write-offs128,98988,817
Non-operating foreign exchange gain(458)(1,281)
Stock-based compensation44,64029,959
Acquisition-related expense14,814938
Publisher bonuses3209,635
MoPub acquisition transition services46,999
Adjusted EBITDA$276,229$131,062
Adjusted EBITDA Margin44.2 %21.7 %
Factors Affecting Our Performance
We believe that the future success of our business depends on many factors, including the factors described below. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to continue to grow profitably while maintaining strong cash flow.
Continue to invest in innovation
We have made, and intend to continue to make, significant investments in our Core Technologies and Software Platform to enhance their effectiveness and value proposition for our clients. We expect that these investments will require spending on research and development, and acquisitions and partnerships related to technology components and products. We believe investments in our software, including AXON, AppDiscovery, Adjust and MAX, will further improve their effectiveness for developers. Our investments will also allow us to enter new mobile app sectors outside of gaming. While our investments in research and development and acquisitions and partnerships may not result in revenue in the near term, we believe these investments position us to increase our revenue over time.
Retain and grow existing clients
We rely on existing clients for a significant portion of our revenue. As we improve our Software Platform and Apps, we can attract additional spend from these clients. Our clients include indie studio developers and some of the largest mobile advertising platforms in the world. We believe there is significant room for us to further expand our relationships with these clients and increase their usage of our Software Platform. We have invested in targeted sales and account-based marketing efforts, including through Adjust’s sales and marketing teams, to identify and showcase opportunities to clients and plan to continue to do so in the future.
In the past, our clients have generally increased their usage of our Software Platform and Apps, and as a result, growth from existing clients has been a primary driver of our revenue growth. We must continue to retain our existing clients and expand their spend with us over time to continue to grow our revenue, increase profitability and drive greater cash flow.
2 Excludes recurring operational foreign exchange gains and losses.
3 In association with the MoPub acquisition, we incurred certain costs to incentivize publishers to migrate to our MAX mediation solution including existing publishers of MoPub as well as publishers on other competitor offerings, and to retain certain existing MAX publishers. These costs were reflected as a reduction to revenue in the period. We have not historically incurred significant publisher migration costs, nor do we currently intend to incur significant publisher migration costs in the future. As such, we have removed the impact of these costs from Adjusted EBITDA.
4 Reflects one-time transition services provided by Twitter to AppLovin.

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Add new clients globally
Our future success depends in part on our ability to acquire new clients. We recently increased our focus on markets outside the United States to serve the needs of clients globally. During the three months ended March 31, 2022, only 43% of our revenue from Software Platform and Apps Business Revenue clients was generated from outside of the United States. We believe that the global opportunity is significant and will continue to expand as developers and advertisers outside the United States adopt our Software Platform and advertise on our Apps. We also see opportunities to acquire new clients outside of mobile gaming, as the capabilities of our Core Technologies and Software Platform are relevant to the broader mobile app ecosystem. We are investing in direct sales, product development, education, and other capabilities to drive increased awareness and adoption of our Software Platform and Apps, which investments may impact our profitability in the near term as we seek further scale. We must continue to acquire new clients to grow our revenue, increase profitability, and drive greater cash flow.
Review of our AppLovin Apps portfolio

Over the past several years, our Apps have been critical in providing first-party data and audiences for our Software Platform to enable us to test, design, and scale our technologies, Given the recent development of our technology, the current scale of our Software Platform, and the reach of our MAX solution, we believe we can reduce our reliance on the data from our Apps. Therefore, we are reviewing our Apps portfolio and its cost structure, focusing on how best to optimize each asset’s contribution to our overall financial performance. This review may result in the retention, restructure, or sale of certain assets, or no change to our Apps portfolio. We may also choose to make certain changes to optimize the cost structure of certain Apps rather than continuing to invest in revenue growth. We believe that our execution of this review, and our ability to optimize the contribution of our Apps portfolio, will affect our revenue growth, profitability, and cash flow.
Continued execution of strategic acquisitions and partnerships
We intend to continue to make strategic acquisitions and enter into strategic partnerships to grow our business. From the beginning of 2018 through March 31, 2022, we have invested over $2.5 billion in 28 strategic acquisitions and partnerships with mobile app developers and for technologies to enhance our Software Platform including the acquisition of MAX in 2018, Adjust in April 2021 and MoPub in January 2022.
While we have a strong pipeline of strategic acquisition and partnership opportunities, we believe our future results of operations will be affected by our ability to continue to identify and execute such transactions that are accretive to our growth and profitability.
Growth and structure of the mobile app ecosystem
Our business and results of operations will be impacted by industry factors that drive overall performance of the mobile app ecosystem. The mobile app ecosystem has grown rapidly in recent years. We expect that any acceleration, or slowing, of this growth would affect our business and results of operations. In addition, even if the mobile app ecosystem continues to grow at its current rate, our ability to position ourselves within the market will impact our business and results of operations.
Mobile app developers, including AppLovin, rely on third-party platforms, such as the Apple App Store and Google Play Store, among others, to distribute games, collect payments made for IAPs, and target users with relevant advertising. We expect this to continue for the foreseeable future. These third-party platforms have significant market power and discretion to set platform fees, select which apps to promote, and decide how much consumer information to provide to advertising networks that enable our Core Technologies and Software Platform to target users with personalized and relevant advertising and allocate marketing campaigns in an efficient and cost-effective manner. Any changes made in the policies of third-party platforms could drive rapid change across the mobile app ecosystem. For example, in April 2021, Apple started implementing its application tracking transparency framework that, among other things, requires users' opt-in consent for certain types of tracking. While this transparency framework has not had a significant impact on our overall business, it may in the future continue to have an impact on it, including the effectiveness of our advertising practices and/or our ability to efficiently generate revenue for our Apps. We rely in part on Identifier for Advertisers ("IDFA") to provide us with data that helps our Software Platform better market and monetize Apps. The IDFA and transparency changes may require us to engage in significant changes to our data collection practices, which may require our expenditure of substantial costs and resources, and to the extent we are unable to utilize IDFA or a similar offering, or if the transparency changes and any related opt-in or other requirements result in decreases in the availability or utility of data relating to Apps, our Software Platform may not be as effective, we may not be able to continue to efficiently generate revenue for our Apps, and our revenue and results of operations may be harmed. Additionally, Apple implemented new requirements for consumer disclosures regarding privacy and data processing practices in December 2020, which
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has resulted in increased compliance requirements and could result in decreased usage of our Apps. In February 2022, Google announced it planned to adopt restrictions to restrict tracking activity across Android devices. These or any similar changes to the policies of Apple or Google may materially and adversely affect our business, financial condition, and results of operations. To date, these data privacy changes have had a relatively muted aggregate impact on our overall results of operations.
New tools for developers, industry standards, and platforms may emerge in the future. We believe our focus on the mobile app ecosystem has allowed us to understand the needs of our clients and our relentless innovation has enabled us to quickly adapt to changes in the industry and pioneer new solutions. We must continue to innovate and stay ahead of developments in the mobile app ecosystem in order for our business to succeed and our results of operations to continue to improve.
Impact of COVID-19
The COVID-19 pandemic and resulting social distancing and shelter-in-place orders put in place around the world have caused widespread disruption in global economies, productivity, and financial markets and have altered the way in which we conduct our day-to-day business. Our Software Platform and Apps do not require physical interaction, thus, our ability to meet the needs of our clients and users has not been materially affected. The full impact of the COVID-19 pandemic on the global economy and the extent to which the pandemic may impact our business, financial condition, and results of operations in the future remains uncertain. See the section titled “Risk Factors—The COVID-19 pandemic and responses thereto across the globe have altered how individuals interact with each other and affected how we and our business partners are operating, and the extent to which this situation will impact our future results of operations remains uncertain” for additional information.
Components of Results of Operations
Revenue
We collect Software Platform Revenue from advertisers spending on our Software Platform. Software Platform Revenue is generated from our advertisers, typically on a performance-based, cost-per-install basis, then shared with our advertising publishers, typically on a cost per impression model.
We generate Apps revenue from both consumers and business clients. Consumer Revenue is from consumer IAPs made by users within our Apps. Business Revenue is generated from advertisers that purchase advertising inventory from our diverse portfolio of Apps. Business Revenue from our Apps was 33% of total Apps Revenue for the three months ended March 31, 2022.
Cost of Revenue and Operating Expenses
Cost of revenue. Cost of revenue consists primarily of third-party payment processing fees for distribution partners, amortization of acquired technology-related intangible assets, and expenses associated with operating our network infrastructure. Third-party payment processing fees relate to Consumer Revenue. The fees for IAPs are processed and collected by third-party distribution partners. Network operating costs include bandwidth, energy, other equipment costs related to our co-located data centers and costs for third-party cloud service providers. We expect our cost of revenue to increase in absolute dollars over the long term as our business and revenue continue to grow. We also expect our cost of revenue as a percentage of revenue to fluctuate period-over-period.
Sales and marketing. Sales and marketing expenses consist primarily of user acquisition costs, other advertising expenses, personnel-related expenses for salaries, employee benefits, and stock-based compensation for employees engaged in sales and marketing, and amortization of acquired user-related intangible assets, marketing programs, travel, customer service costs, and allocated facilities and information technology costs.
We plan to continue to invest in sales and marketing to grow our customer base and increase brand awareness. As a result, we expect sales and marketing expenses to increase in absolute dollars. We also expect our sales and marketing expenses as a percentage of revenue to fluctuate period-over-period in the near term as we invest to grow our customer base and increase brand awareness, and to decrease over the long term as we benefit from greater scale.
Research and development. Research and development expenses consist primarily of product development costs, including personnel-related expenses for salaries, employee benefits, and stock-based compensation for employees engaged in research and development, professional services costs related to development of new apps by third parties, consulting costs, regulatory compliance costs, and allocated facilities and information technology costs.
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We plan to continue to invest in research and development to continue to enhance our Core Technologies and Software Platform, and to improve existing games and develop new games. As a result, we expect research and development expenses to increase in absolute dollars. We also expect our research and development expenses as a percentage of revenue to fluctuate period-over-period in the near term as we invest to enhance our Core Technologies and Software Platform and improve our existing Apps and develop new Apps, and to decrease over the long term as we benefit from greater scale.
General and administrative. General and administrative expenses consist primarily of costs incurred to support our business, including personnel-related expenses for salaries, employee benefits, and stock-based compensation for employees engaged in finance, accounting, legal, human resources and administration, professional services fees for legal, accounting, recruiting, and administrative services (including acquisition-related expenses), insurance, travel, and allocated facilities and information technology costs.
We plan to continue to invest in our general and administrative function to support the growth of our business. In addition, we expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance and reporting obligations of a public company, increased insurance and investor relations expenses, and increased professional services fees (including acquisition-related expenses). As a result, we expect general and administrative expenses to increase in absolute dollars. We also expect our general and administrative expenses as a percentage of revenue to fluctuate period-over-period in the near term as we invest to support the growth of our business, and to decrease over the long term as we benefit from greater scale.
Other Income and Expenses
Interest expense and loss on settlement of debt. Interest expense and loss on settlement of debt consists primarily of loss related to debt extinguishment, interest expense associated with our outstanding debt, including accretion of debt discount, and changes in fair value of interest rate swap accounted for as a cash flow hedge related to the stream of variable interest payments associated with a portion of our outstanding debt.
Other income, net. Other income, net, includes interest earned on our cash and cash equivalents, gains and losses related to embedded derivatives and other financial instruments accounted for at fair value, and foreign currency exchange gains (losses), which consist primarily of remeasurement of transactions and monetary assets and liabilities denominated in currencies other than the functional currency at the end of the period.
Benefit from income taxes. We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have different statutory tax rates than those in the United States. Additionally, certain of our foreign earnings may also be taxable in the United States. Accordingly, our effective tax rate will vary depending on the relative proportion of foreign to domestic income, impacts from acquisition restructuring, deduction benefits related to foreign-derived intangible income, future changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. Additionally, our effective tax rate can vary based on the amount of pre-tax income or loss.
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Results of Operations
The following table summarizes our historical condensed consolidated statements of operations data:
Three Months Ended
March 31,
20222021
(in thousands)
Revenue$625,421 $603,877 
Costs and expenses:
Cost of revenue(1)(2)
281,780 223,061 
Sales and marketing(1)(2)
290,133 265,513 
Research and development(1)
126,250 60,876 
General and administrative(1)
55,245 42,962 
Total costs and expenses753,408 592,412 
Income (loss) from operations(127,987)11,465 
Other income (expense):
Interest expense and loss on settlement of debt(32,009)(35,010)
Other income, net2,014 9,790 
Total other expense(29,995)(25,220)
Loss before income taxes(157,982)(13,755)
Benefit from income taxes(42,684)(3,180)
Net loss$(115,298)$(10,575)
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(1)    Includes stock-based compensation expense as follows:
Three Months Ended
March 31,
20222021
(in thousands)
Cost of revenue$1,052 $109 
Sales and marketing6,919 1,819 
Research and development20,629 6,465 
General and administrative16,040 21,566 
Total stock-based compensation$44,640 $29,959 
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(2)    Includes amortization expense related to acquired intangibles as follows:
Three Months Ended
March 31,
20222021
(in thousands)
Cost of revenue$104,619 $82,185 
Sales and marketing16,392 3,209 
Total amortization expense related to acquired intangibles$121,011 $85,394 
The following table sets forth the components of our condensed consolidated statements of operations for each of the periods presented as a percentage of revenue(1):
Three Months Ended
March 31,
20222021
Revenue100 %100 %
Costs and expenses:
Cost of revenue45 %37 %
Sales and marketing46 %44 %
Research and development20 %10 %
General and administrative%%
Total costs and expenses120 %98 %
Income (loss) from operations(20)%%
Other income (expense):
Interest expense and loss on settlement of debt(5)%(6)%
Other income, net%%
Total other expense(5)%(4)%
Loss before income taxes(25)%